This watchdog blog, by journalist Norman Oder, offers analysis, commentary, and reportage about the $4.9 billion project to build the Barclays Center arena and 16 high-rise buildings at a crucial site in Brooklyn. Dubbed Atlantic Yards by developer Forest City Ratner in 2003, it was rebranded Pacific Park in 2014 after the Chinese government-owned Greenland Group bought a 70% stake in 15 towers. New York State still calls it Atlantic Yards. Contact: AtlanticYardsReport[at]hotmail.com

Wednesday, February 29, 2012

In the third and likely final day in which Forest City Ratner (ex-)employees testified in the Yonkers corruption case, a federal jury yesterday heard more evidence that the developer had behaved in a questionable manner.

After all, testimony yesterday indicated that Forest City executives had no problem with Zehy Jereis's seemingly no-show job and, even though he hadn't submitted required monthly reports and a lower-level employee had raised a red flag, two of the firm's top government relations executives, Bruce Bender and Scott Cantone, ordered that he be paid $15,000.

But the developer's not on trial, and the jury might now be wondering why Jereis and Sandy Annabi face corruption charges, while Forest City, the beneficiary of Annabi's changed vote to green-light the Ridge Hill project, is unscathed. (Jurors of course can be instructed to address only the culpability of the defendants, not any other parties.)

Helping prosecution or defense?

Also, though a prosecution witness, Bender, who recently left Forest City, at one point complicated the prosecution's theory of the case. He corroborated Annabi's defense that she changed her vote not because of a stream of payments she was receiving from Jereis but because she was convinced on the merits.

Jereis's defense is that he spent money--$174,000 over some years--on Annabi because he was infatuated with her. Annabi, who denies a romantic relationship, claims she changed her vote on Ridge Hill and the other project involved in the trial, Longfellow, because developers made concessions. However, Forest City's concessions on Ridge Hill were deemed minor.

Immunity? Or just rough and tumble

Neither Bender nor Cantone said they were testifying under immunity, or were described as doing so. Either that information has not yet emerged, or prosecutors were confident there was no inkling of illegal acts.

If so, perhaps defense lawyers have no reason to portray Forest City and its employees as criminal, rather than as people enmeshed in the rough and tumble of politics, which includes patronage spending.

With the Longfellow project, there appears to be a clear quid pro quo, with Jereis funneling money he got from the developers through an intermediary, Anthony Mangone, who has already pleaded guilty.

The Ridge Hill case is far more murky. The $15,000 Jereis got from Forest City came after the fact, and might be seen--from the perspective of prosecutors--as a replenishment of the funding stream he maintained with Annabi. That funding encompassed far more than the money Jereis got in connection with the two projects.

With the Longfellow aspect of the case, defense lawyers are challenging witnesses who are cooperating after pleading guilding, including developer Franco Milio, who testified yesterday, according to the Journal News.

Somewhat similarly, defense lawyers may suggest that, if Forest City did nothing illegal, neither did their clients. As I wrote 2/13/12, Jereis’s lawyer, Anthony Siano, stated in a memo: “In effect, the developers of Ridge Hill appear to form no part of the substantive violations against defendant Jereis. This appears to be so despite the recitations as to Ridge Hill in the conspiracy count... the Indictment does not allege who, if anyone, made corrupt payments to Jereis and does not even identify whether any such corrupt payments were bribes or extortion payments."

Political assistance?

After lengthy testimony by Cantone on Feb. 24 and both Cantone and Bender on Feb. 27, yesterday morning, what was mainly at issue was what work Jereis did when he was hired at a $5,000 a month consultant for one year not long after Annabi changed her vote.

Assistant U.S. Attorney Perry Carbone pointed to suggestions raised the previous day that, even after Annabi's vote, Jereis might have helped Forest City with Ridge Hill opponent Paul Feiner, Supervisor of nearby Greenburgh.

Bender said no, given that Jereis was a Yonkers Republican and Feiner a Greenburgh Democrat: "That just doesn't mix."

What Jereis did

Carbone, querying Bender in a style of studied calm, tried to clear up some lingering issues.

What had Bender told the grand jury in 2008 about how instrumental Jereis's role had been in getting Ridge Hill approved?

"I thought it was very helpful," Bender replied.

Who'd pay the fees?

Also at issue is whether Annabi knew Jereis ever asked for anything of value. According to previous testimony, Forest City executives said she had not been copied on emails in which he asked Forest City for a job.

In a 6/14/06 meeting, when Annabi learned she'd have to postpone a planned vacation to be present for the 7/11/06 Council vote, who, asked Carbone, raised the issue of whether Forest City might pay the late fee or penalty on her ticket?

Bender said he didn't know if it was Jereis or Annabi.

(Last week, Cantone testified that it was Jereis who asked, but that Forest City, citing "ethical and legal concerns," said no. This was communicated to Jereis who said "he'll figure it out, maybe he'll pay it himself," according to Cantone.)

"If it was Mr. Jereis, was she present?"

"I believe so," replied Bender.

"What did you say in response?"

"We could not do it."

Later, William Aronwald, Annabi's attorney, asked how much the cancellation fee was.

Bender said he didn't know.

"Certainly not in the tens of thousands of dollars," Aronwald followed up.

Aronwald then brought up another reported payment, which might be seen as a cleaner way to provide value to an elected official.

"Are you familiar with a company known as Westchester Invaders?" Aronwald asked. "Isn't it true Forest City Ratner made a contribution of $10,000 to Westchester Invaders at Council Member [Patricia] McDow's or [FCR lobbyist] Melvin Lowe's request?"

"I can't recall," Bender said.

Westchester Invaders is a drum and bugle corps that McDow has saluted, but I couldn't find corroborating evidence of a Forest City Ratner contribution. Then again, it would not be out of line with company practices in Brooklyn.

Why did Annabi flip?

Siano, Jereis's attorney, reminded Bender of his 2008 grand jury testimony that he believed that he, not any gift from Jereis, had persuaded Annabi to change her vote.

Bender said it was a combination: "It was a collective effort by a lot of people."

"Your team persuaded her?" Siano asked.

"Yes."

"You believe that as you sit in the witness box today?" Siano pressed on.

"Yes," replied Bender, in a subdued manner.

That complicated the prosecution's case.

Prosecutor Carbone popped back up to remind jurors of the prosecution's theory. What else, he asked Bender, had the witness said to the grand jury?

"That Mr. Jereis was advocating for the project at the same time," he said.

But "advocating for the project" is lobbying, and lobbying isn't out of bounds.

Swagerty enters

If Bender and Cantone came off as no strangers to rough and tumble politics, the next witness, former Forest City employee John Swagerty, was more of a Boy Scout, a 30something man with a chipper, straightforward manner and the internal peace of having tried to be something of an internal whistleblower.

Swagerty worked at Forest City about eight-and-a-half years, rising to VP in retail development, before leaving a year ago to work for Acadia Real Estate Trust.

On Ridge Hill, he oversaw the environmental review and worked on the zoning change sought, reporting to Executive VP Richard Pesin. Swagerty had no interaction with government officials, given that Bender and Cantone "wanted to make sure they were the only ones."

Swagerty was in charge of the budget, and the ensuring that consultants hired were placed under the appropriate budget lines.

Under questioning from Assistant U.S. Attorney Jason Halperin, Swagerty described the concessions granted Annabi and in the previous few months. The additional $10 million promised in taxes was about 1.5% of the total project cost.

As for changes regarding traffic or environmental issues sought previously by Annabi, in concert with other project opponents, there were none.

"Junior varsity" invoices

On 9/19/06, according to Cantone's testimony last week, Jereis was sent a one-year, $5,000-a-month consulting agreement, which--for reasons yet unexplained--he didn't return until 10/10/06. It was backdated to 8/1/06, for reasons yet unexplained.

On 10/13/06, shortly after Forest City Ratner formally hired Jereis and backdated the contract, Swagerty received and reviewed an invoice from Jereis's firm, ZJ Enterprises, purportedly covering work in August and September.

The invoice simply listed the months and fee per month, with no information about tasks Jereis accomplished. "It struck me as a little unprofessional," Swagerty testified. "I think I used the word JV: junior varsity."

Did he pass it on? "Actually, I kicked it back to Scott Cantone and told him I needed to see more information to send it to the accounting department," Swagerty replied.

Prosecutors did not ask what happened next.

Getting Jereis paid

Under questioning by defense attorney Siano, Swagerty agreed that revised invoices did come back, though he didn't know who revised them. (Their content was not described.) By December 2006, the total value of the invoice had reached $15,000, covering three months.

On 12/6/06, Swagerty received an email message from Debbie Venezia, then the administrative assistant for Bender and Cantone. It was sent with the notation "High Importance."

"We need to get Zehy Jereis paid ASAP," she wrote. "Can you please expedite? It is extremely important that we get a check."

Swagerty signed off and sent it to accounting.

Jereis's reports and an empty Exxon station

As part of his contract, Jereis was also supposed to send in reports on his work hunting for potential retail sites, but did not do so until March 2007, when news of the federal investigation surfaced.

No, acknowledged Bender, after first saying it wasn't his function at the company.

On redirect, Carbone got Bender to explain that a large corporation often sets up sub-entities.

Swagerty, under questioning by Siano, agreed he contacted Cantone because he had never heard of FC Acquisition. "His response was, 'Put it in retail hunting,'" Siano related, drawing Swagerty's confirmation.

The rest of the testimony: Longfellow

After Swagerty left, the trial shifted to discussion of the Longfellow project, with developer Franco Milio on the stand, as reported by the Journal News:

A Yonkers businessman testified Tuesday that his lawyer persuaded him in 2006 to pay $30,000 so then-Councilman Sandy Annabi would stop opposing his land-swap deal and let his development of the Longfellow School property proceed.
Franco Milio told a federal jury that his father, Antonio, ended up paying the money to lawyer Anthony Mangone after Mangone introduced him to Annabi’s cousin, Zehy Jereis, and then told Milio the payment was “to get the approval done.”